Aetna, the country’s third largest private insurer, announced this week that it will cease offering the vast majority of its current Obamacare-compliant plans next year, citing skyrocketing operational costs due to President Obama’s signature law. Beginning in 2017, Aetna will only write policies in Delaware, Iowa, Nebraska and Virginia, shuttering operations in 11 of the 15 states where it currently provides coverage, leaving hundreds of thousands of families without insurance options.
Aetna’s reasoning? The company has already lost $430 million in revenue on individual policies since the program’s exchanges opened in January 2014. This concern, shared publicly by all of America’s large insurers, is primarily due to Obamacare’s guaranteed issue provision, which mandates that insurance companies write policies for anyone who applies, regardless of his or her health status or history of payment.
Sick patients typically cost much more money than what they contribute via their premiums. The Obama administration imposes artificial caps on what insurance companies can charge policyholders, even those who present an exceptionally high risk to them. As a result, the costs associated with covering sick patients are passed to healthy patients.
For decades, insurers have engaged in “risk pooling,” a practice that ensured they cleared even a modest profit by insuring more healthy patients than sick ones. Because they were far less likely to need extraordinary medical services, the premiums paid by low risk policyholders could be used to offset the costs sick patients incurred.
But Obamacare’s guaranteed issue policy, coupled with the superfluous services the law now requires, has created premium rate hikes averaging between 18 percent and 23 percent nation-wide, with many families enduring even more dramatic increases. For many families, private health care has become simply too expensive to afford, so they have opted for government-run plans like Medicaid instead. Many young policyholders, seeing little need for insurance while healthy, have chosen to abandon private insurance all-together, paying the Obamacare tax in lieu of expensive insurance.
Aetna’s reasoning? The company has already lost $430 million on individual policies since January 2014
This has created a lopsided risk pool for insurers. While initially tempted by the individual mandate contained within Obamacare that demanded all Americans have health insurance, insurance companies are now realizing that the perfect storm of Obamacare regulations has actually driven healthy patients out of the market while simultaneously bringing high-risk policyholders into their pools.
“Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool,” Aetna CEO Mark Bertolini said.
Aetna is not alone. The nation’s top five insurers have all publicly proclaimed that the debilitating consequences from their affiliation with President Obama’s program have caused serious harm to their industry.
Thus far, United Health Care and Humana have declared they will exit most, if not all, of Obamacare plans in the months ahead. Anthem and Cigna have requested a merger, which the Obama administration vehemently opposes, to pool their resources to address plummeting profits spurred by their participation in Obamacare.
As private insurance options evaporate, millions of Americans have been thrust onto the Medicaid rolls, leaving them with fewer high-quality options and reduced access to their preferred health care providers. For many Republicans, this serves as confirmation of the law’s intended, though not stated, purpose: to make private insurance so unaffordable that most Americans would be stranded on Medicaid. Because the public so vocally opposes government-run health care, the Obama Administration had to disguise its signature law as a traditional model that merely aimed, through mandates and subsidies, to expand access to private insurance.
Many experts forecast that Obamacare will lead to a European-style health care system in the U.S., with evidence mounting that directly contradicts the Obama administration’s assurances during the law’s creation that America’s free market-based system would remain in-tact. If this were to occur, government insurance subsidized by taxpayers would be the primary source of coverage for most Americans. Supplementary insurance would be purchased as a luxury for those who could afford it.
Ellen Carmichael is a senior writer for Opportunity Lives. Follow her on Twitter @ellencarmichael.